New billion-dollar Abu Dhabi fund will look far and wide for web3 deals

Abu Dhabi-based Venom Ventures Fund’s announcement last week that it’s ready to plough $1 billion into web3 applications certainly caught the eye — not least of all because it came after a disastrous year for an industry still reeling from the collapse of FTX, which until November was one of its centerpieces.

But Peter Knez, one half of a two-person leadership team at Venom, thinks the timing couldn’t be better.

“A good time to launch something like this is when liquidity is scarce,” he told The Block in an interview. “You can show up with a lot of capital and there’s a lot of people — good projects — that are having a hard time getting capital.”

It’s a well-worn line, in any industry, for well-capitalized investors operating in a depressed market. Knez knows his way around those. He was formerly co-chief investment officer of BlackRock’s fixed income division, and before that spent time at Lincoln Capital Management and Goldman Sachs.

For example, crypto investment firm HashKey Capital just unveiled a third $500 million fund. It closed the fund when it did, according to CEO Deng Chao, exactly because the sector has bottomed out. The difference is that HashKey launched its first two funds at the bottom of previous crypto cycles in 2018 and 2020, respectively. It’s been around the block, so to speak.

Venom is an almost entirely unknown prospect — albeit one armed with a mountain of capital. How will it go about putting $1 billion to work?  

Regional focus

Venom’s is a broad offering. The company plans to run its venture capital operation alongside a startup incubator while offering advisory services for founders, according to its website. It will also invest from right across the startup spectrum, from grants of $25,000-200,000, to equity investments ranging from seed-stage checks right through to late-stage capital, Knez said.

“On the Venom Ventures side, our view is we will do from seed to Series, A, B, C to IPO,” he said. “Restricting yourself by stage rather than by quality of opportunity, if you have the capital, doesn’t really make sense — if you can do the homework.”

Venom Ventures is the product of a partnership between Venom Foundation — a little-known Layer 1 blockchain licensed by the Abu Dhabi Global Market (ADGM) and tailored to the needs of the Middle East, North Africa and other emerging economies — and Iceberg Capital, a locally regulated investment management firm.  

The fund has a mandate to help foster the development of the web3 market in the United Arab Emirates (UAE) — a major focus for the Middle Eastern country over the past year.

Last year, Dubai announced a “metaverse strategy” designed to add $4 billion to its economy by 2027. It has been offering licenses to crypto operators through the Virtual Assets Regulatory Authority (VARA), a dedicated regulatory body.

“Part of the reason for being in Abu Dhabi, the UAE in general and Abu Dhabi in particular, is that they’re very, very accommodative to having a regulatory environment,” Knez said.

He added that, while Venom has a “regional focus,” its goal is to invest globally. The fund will consider all projects, not only those committed to developing on the Venom blockchain.

In terms of sub-sector, Venom will target projects and protocols in payments, asset management, banking services and GameFi, according to its website. But Knez appears particularly drawn to teams focused on spurring institutional adoption.

Before joining Venom, he said he had been “looking around for a blockchain that I could adopt in order to drive the digital transformation of asset management, particularly around things like tokenization.”

“In my own view, the representation of securities — particularly the less liquid ones like real estate in a tokenized format — is probably the biggest innovation since the advent of derivatives,” he said.  

Capital to spare

The UAE, rich in oil and gas, has not to date been a major player in the crypto space. But its recent overtures about splashing cash in the sector appear to have piqued the interest of some founders.  

Binance CEO Changpeng Zhao reportedly traveled to Abu Dhabi in Nov. 2022 to seek investment for the firm’s billion-dollar industry recovery fund.

Exactly where the crypto-curious capital within the UAE will come from is unclear. Knez said the bulk of the $1 billion at Venom’s disposal comes from local, high-net-worth individuals.

“That’s how we started it. We’ll strategically decide how much we want to scale it down the road. But a billion dollars is quite enough to get started,” he added.